Los Gatos, California Netflix’s crackdown on password sharing helped the company report healthy subscriber growth overall for the second quarter of 2023, as its worldwide subscribers grew from 5.89 million to 238.39 million, and the number of subscribers in the US and Canadian markets grew from 1,173,000 to 75,571,000.
Netflix also said the number of subscribers to its ad-supported plan has nearly doubled from a “small subscription base” since the first quarter, but did not provide specific numbers.
“Second quarter 2023 revenue of $8.2 billion and operating profit of $1.8 billion were broadly in line with our guidance. Continued growth of our advertising-supported plan,” the company said in a letter to shareholders. “We are still targeting full year 2023 operating margin of 18% to 20%. We are the leader in streaming engagement and according to Nielsen, we had the top rated original streaming series in the US for 24 of the first 25 weeks of 2023 and the top rated movie for 21 weeks.
But Netflix shares declined in aftermarket trading on lower-than-expected revenue growth However, the company beat forecasts for subscribers and earnings per share.
The company hasn’t released a number for its ad-supported level of customers. “While we are expanding our reach — advertising plan memberships nearly doubled from Q1 — its membership base is still small, so current advertising revenue is not significant to Netflix,” it said in a letter to shareholders. “Building an advertising business from scratch is not easy and we still have a lot of work ahead of us, but we are confident that over time we can grow advertising into a multi-billion dollar incremental revenue stream.
Management also commented on efforts to attract customers to the ad-supported offering, noting that the ad-supported tier now has about 95% of the content available in the ad-free offering.
“Greater sophistication of pricing and scheduling strategy is critical to driving more revenue,” the letter said. “In the first quarter, we reduced prices in some under-penetrated markets, and in the second quarter, we reduced our ad-free Basic plan for new and re-entering members in Canada (existing members on the ad-free Basic plan will be unaffected). Now we are doing the same in America and Britain. We believe that our entry-level prices in these countries – $6.99 in the US, £4.99 in the UK and $5.99 in Canada – provide great value to consumers given the breadth and quality of our catalogue.
It also said that prohibiting password sharing increased profits. “Now that we have rolled out payment sharing more broadly, we are more confident about our financial outlook,” the company told shareholders. “We expect revenue growth to accelerate in the second half of 2023 as monetization accelerates following our most recent payment sharing launch and as we expand our initiatives to nearly all remaining countries as well as the continued steady growth of our ad-supported plan (more details in the Monetization and Revenue section).”
Lower programming expenses and other cost-cutting measures also caused the company to raise its profit margin forecast.
Stay Connected With Us On Social Media Platforms For Instant Updates, Click Here To Join Us Facebook
